Tertiary Education Financing in Small States: Does Size Matter?

1. Tertiary Education Financing in Small States: Does Size Matter? JamilSalmi Tertiary Education Coordinator Paris, 2 July 2009

2. the future of tertiary education financing?

4. social and economic progress is achieved principally through the advancement and application of knowledge World Development Report 1998/99

5. outline • international trends • does size matter? • impact of the crisis

6. funding sources (macro) from public funding exclusively to cost sharing

7. fees • for everybody / dual track • undergraduate / postgraduate • national policy / individual institutions • special category students (repeaters, mature, part-time, continuing ed, foreign, out of state)

8. fees • one fee or program-linked? • payment upfront or delayed payment? • ceiling / freedom to set

9. optimal fees policy • universal • associated with student aid (Jamaica) • adjusted to cost of living index

11. political economy • consultation and consensus building • decentralization / autonomy

13. funding sources (institutional level) from dependence on public funding to diversified funding

14. main categories of revenues • budget • tuition fees • productive activities • donations • loans

15. productive activities

18. allocation mechanisms from untied funding to performance-based funding

21. innovative allocation mechanisms • funding formula- output measures are used to determine all or a portion of funding formula • performance contracts- governments enter into agreements with institutions which set mutual performance-based objectives

22. innovative allocation mechanisms (II) • competitive funds- support peer-reviewed proposals designed to achieve institutional improvement or national policy objectives • demand-side vouchers- finance the recurrent expenses of institutions indirectly through vouchers provided to students who enroll in the university of their choice

23. allocation mechanisms from direct funding to indirect funding

24. indirect funding • grants and scholarships • student loans • vouchers

25. Kazakhstan experience • 20% best qualified secondary school graduates • choose university • $1,200 for public university • up to $4,000 for private university • must maintain top academic grades

26. Kazakhstan experience (II) • increased competition generally • some private institutions have been able to attract a growing number of voucher beneficiaries • but insufficient resources to finance all students

27. equity / benefits incidence • who gets what share of public resources?

28. evolution of tertiary education enrollments rates 80 70 60 50 40 30 20 10 0 1980 1997 2005 High Income Countries Least Developed Countries Sub-Saharan Africa Arab States Latin America and the Caribbean East Asia and Oceania South Asia

29. tertiary enrollment per quintile

30. does size matter?

31. small is still beautiful • many success stories • mission focus and niche definition • strategic choice of studies abroad

32. small is still beautiful (II) • regional / international collaboration • multi-state (UWI, USP) • regional (I2E) • hub (Singapore, UAE) • international recruitment • Internet-based research and training

34. challenges (macro-level) • limited fiscal resources • economies of scale (higher investment and unit costs) • higher vulnerability to economic fluctuations • Jamaica (bauxite, banana, sugar, coffee, tourism)

35. challenges (macro level) • limited number of institutions reduces • possibilities for performance-based allocation • risk of inefficient use of resources (high staff/student ratios) • options for institutional diversification

36. challenges (macro level) • tension between national interests and regional commitments • dangers of study abroad strategy • relevance • brain drain (donor funding, special visas, financial incentives)

37. challenges (institutional level) • vulnerability of regional institutions / programs dependent on several countries • funding • cashflow • foreign exchange risk • islands within islands

38. challenges (institutional level) • small economic base means less fund-raising opportunities • quality implications • limited pool of talent • monopoly situation (as institution or type of institution) • resistance to change (political volatility)

39. impact of the crisis

40. resources flows • reduced government funding for teaching, research and student aid • reduced resources for institutions as demand falls (new domestic and foreign students, dropouts)

41. resource flows (II) • fewer resources from private sector (donations, contracts) • fall in stock market values reduces value of endowments and pension funds

42. response of tertiary education institutions • budget cutting measures • employment-related • programs and academic organization • students (number, teacher/student ratio) • efficiency measures • revenue generation • demand-linked measures • financial measures

43. implications for governments • increase scholarships and establish / strengthen student loan programs • include tertiary education in economic stimulus plans • R&D • entrepreneurship for innovation

44. opportunities for small states • innovations and startups • attracting foreign students • philanthropy • efficiency gains and no-frill options • implementing structural reforms

45. scenarios for tertiary education in small states • graduate unemployment & brain drain • shifting demand (from long to for shorter duration programs, private to public, foreign to domestic) • increased inequality • deteriorating quality (with fewer resources)

46. scenarios for tertiary education in small states • continued dependence on public funding • resources fluctuations and quality deterioration • diversified funding

47. State controlled Gvt budget 95% students’ fees 3% other charges 2% Autonomous Gvt budget 40% students’ fees 25% research and contract earnings 20% other earnings 10% donations etc 5% the two extremes

48. financial planning capacity • information and monitoring • fund-raising team • investment strategy • contingency planning